Saturday, December 15, 2018

I
just thought: there is a caveat to my post saying that I am in favour of dictatorship with regard to measures against climate change: climate measures should be fair and
not hit the poor more than the rich, or rather the reverse: they should
hit the rich more than the poor.

As a friend of mine said: "Macron's
huge mistake was approaching the climate problem without any
consideration for the social damage that decades of neoliberal
austerity have caused to the living standards of the majority.
Mitigating the coming climate catastrophe will require sacrifices from
all, but they will only be accepatablle in a democracy if it's clear
that the rich are sacrificing the most. That means that the funds for
conversion to a sustainable economy need to come from wealth taxes that
will reduce today's glaring inequalities and a restoration of the
welfare guarantees that ordinary people have lost since 1980. If
citizens see that happening, they will support the measures necessary to
insure a future for their children.

As one of the French Green protesters said last weekend, ecological justice is inseparable from social justice."

More or less the same is said by the group of Piketty who drafted a Manifesto for change of policies in Europe. Its second paragraph states:

"The new European governance that has consolidated over the past decade
in the wake of the financial crisis is not only opaque and
unaccountable as epitomized by the Eurogroup; it is also ideologically
biased towards economic policies with an almost exclusive focus on
financial and budgetary objectives. Unsurprisingly, Europe has proved
unable to take up the challenges with which it is confronted: growing
inequalities across the continent, the acceleration of global warming,
the influx of refugees, structural public under-investment (most notably
in universities and research), tax fraud and evasion…"

And the fourth paragraph of the Piketty Manifesto states:

"To date, European integration has primarily benefited the most powerful
and most mobile economic and financial agents: major multinationals,
households with high incomes and large assets. Europe will only
reconnect with its citizens if it proves it has the ability to bring
about genuine European solidarity, by having the main beneficiaries of
the globalization process fairly contribute to the financing of the
public goods Europe desperately needs."

Friday, December 14, 2018

I just read an interesting article in the German weekly newspaper Die Zeit that tells what climate scientists would do when they ruled the world. I copy below the English version of this article, as published by Die Zeit. [The idea of climate scientist letting rule the world with respect to climate policies is what I proposed in a post on this blog of two years ago: On the environment I support dictatorship]

We asked nine leading
climate scientists to imagine if they were the sole ruler of the
planet, what they would do to limit global warming if they could make a
unilateral decision and didn't have to resort to negotiations, political
wrangling or compromises. What immediate action would you take?

"A CO2 Tax Makes Technologies Such As Wind and Solar Power Competitive"

I would no longer let countries, companies and citizens emit carbon dioxide (CO2)
for free and would instead immediately introduce a price of 50 euros
for every ton of CO2 emitted. This would hold everyone responsible for
the negative effects of fossil emissions, which include climate change,
air pollution and health problems. A CO2 tax would have three effects:
First, it punishes the consumption of coal, oil and gas according to
their carbon content. Second, it makes CO2-free technologies such as
wind or solar power competitive and drives new investments in that
direction. Third, it generates revenues for governments, which I would
redistribute on a per-capita basis. This would protect poorer households
in particular from higher energy prices and ensure a just transition.
MCC research shows that even a low price for CO2 could finance universal
access to clean water and sanitation in many countries (Nature Climate Change: Jakob et al., 2015). This would make climate policy a success story.

"New Industrial Plants Should Be CO2-Free By 2025"

Niklas Höhne is the director of the New Climate Institute in Berlin and a professor at Wageningen University in the Netherlands.

To keep the climate at
safe levels, global greenhouse gas emissions must be reduced to zero in
all sectors and countries. This is why I would prescribe, that
everything that is newly built should be emission-free. From now on, for
example, only power plants that use renewable energies should be built,
not new fossil fuel power plants. From the early 2020s, only electric
cars or cars with other CO2-free engines should be sold. And new
industrial plants should be carbon dioxide-free by 2025. The clear time
horizon as of when only zero emission technology can be sold would drive
the necessary innovation. In addition, I would implement a tax on
greenhouse gas emissions to collect financial resources to compensate
for potential negative social effects of this rapid transition, eg. in
regions that are currently dependant on coal mining or use.

The currently implemented climate
policies with the highest impact follow this model even if initially
implemented by only a few. For example, the first electric cars suitable
for series production were developed because the U.S. state of
California introduced a quota for zero-emission cars in the 1990s (CARB ZEV). With minimum quotas for the new registration of electric vehicles, China
is also forcing car manufacturers to expand their product range, which
will then be sold globally. Another example: Wind power, which was
mainly subsidized in Germany, is now being used worldwide – even in
countries that previously did not have an interest in it before, such
as China, India and Australia, due to their large coal reserves.

"All Countries Should Take Stock of the Damage"

Friederike Otto is the acting director of the Environmental Change Institute at Oxford University in England.

Think of the forest fires
in California in November of this year or on a less dramatic level the
heatwave in Germany and the EU this summer. The methods available today
allow us to attribute such events to human-induced climate change (Annual Review of Environment and Resources: Otto et al., 2017).
At present, however, we simply have no idea about the damages and
losses caused by climate change to date. It is difficult to solve a
problem that is vague and often assumed to be a future problem only. All
countries should therefore develop an inventory so that we can
effectively see the costs of climate change.

About 25 percent of annual global greenhouse gas emissions are attributable to food – especially meat products (Climate Change 2014: Smith et al., 2014). We should therefore all immediately adopt the "10 Guidelines of the German Nutrition Society (DGE) for a Wholesome Diet"
– and nourish ourselves with a healthy mix of food that includes a high
proportion of fruit and vegetables. This helps to prevent obesity and
high blood pressure, it would slow global warming and it would
significantly lower the nitrogen pollution in our groundwater. This is
because most nitrogen is produced in agriculture to grow feed crops for
animals or comes from animal manure (The European Nitrogen Assessment: Sutton et al., 2011).
People in rich countries should reduce their meat consumption to 600
grams per week as soon as possible and to 300 grams per week later: For
Germans, this would mean first cutting meat consumption in half and then
reducing it to two or three small portions a week. At the same time, I
would double the research funding for plant-based alternatives to meat.

"We Need Public Transport and Better Teleconferencing"

Gabriele Clarissa Hegerl is a professor of climate system sciences at the University of Edinburgh in Scotland.

I would create reliable,
fast and convenient public transport, so that short-haul flights are
unnecessary and many more people can commute by public transport.
Another very practical measure would be to improve teleconferencing.
This could help us to avoid many short-haul journeys and flights, which
in turn would significantly reduce our CO2 footprint. Avoiding air
travel altogether is one of the most effective measures for
significantly reducing an individual's greenhouse gas emissions (Environmental Research Letters: Wynes and Nicholas, 2017).

"Our Biosphere Must Be Protected To Store Carbon"

Yadvinder Malhi is a professor of ecosystem science at Oxford University in England.

We must preserve and
restore our ecosystems to store and absorb carbon, to regulate local and
regional rainfall, and to maintain a moderate climate. Our forests and
soils contain significant amounts of carbon, so deforestation has a
direct impact on our climate. Tropical regions, for example, are the
engines of atmospheric circulation. The loss of rainforest, which is
transformed into cattle farms or oil palm plantations, also affects
distant regions such as Europe, Siberia and North America. It also has
an indirect effect on rainfall and cloud formation. Clouds, in turn,
reflect sunlight and cool our planet. Our actions do not only have local
consequences, the scale of our activities is much larger.

We also need to think
more about restoring forests and other ecosystems in the heavily
transformed landscapes of Europe. We must protect intact areas and
change our policy incentives in the north to restore forests on
abandoned or marginal farmlands. Nature is not an external cost factor
that can be included in or omitted from our economic model. Nature is
one of our most important allies in reducing the scale and impact of
climate change.

Angelika Hilbeck is with the Institute for Integrative Biology at ETH Zurich in Switzerland.

Most of the food we buy
in supermarkets comes from industrial agriculture, especially in
developed countries, but increasingly worldwide. This form of intensive
farming is based on chemical inputs and practices that are
energy-intensive and harmful to the environment. According to the IPCC,
it contributes to more than 20 percent of global human-caused greenhouse
gas emissions (IPCC, Working Group III: Mitigation, 2014).
We must therefore use agro-ecological production systems instead. This
means applying ecological and social concepts in food design, changing
farming practices and following these principles in our agricultural
systems.

Another consequence: With
improved agriculture, we preserve biodiversity, the fertility of our
soils and contribute to feeding humanity. The UN Human Rights Council reported this in 2010. Our agriculture can thus become part of the solution rather than a problem that contributes to climate change.

"Products Should Be Labeled with CO2"

Per
Espen Stoknes is the author of the book "What We Think About When We
Try Not To Think About Global Warming: Toward a New Psychology of
Climate Action."

All products and services
worldwide should be marketed and sold with clear labeling of their CO2
emissions and their environmental footprint. The life cycle of the
product should be fully understandable to the consumer. Whether the
product has a positive, neutral or negative footprint should be as
prominent as the purchase price. And it should be easy to understand
where and how the products were made and who made them. This could be
possible, for example, with blockchain databases that trace and store
the data and path of the product. This would make it easy for customers
to choose greener products in all markets and prevent products from
being advertised with a sustainable label without clear evidence.
Greenwashing would no longer be possible.

"We Need Politicians To Represent Our Interests"

Michael Mann is the director of the Penn State Earth System Science Center in University Park, Pennsylvania.

In the United States, we currently provide more subsidies for fossil fuels than for renewable energies.
This is the opposite of what is required. We need politicians who
represent our interests rather than fossil fuel interests. At the
moment, the U.S. federal government is led by the latter. My wish
therefore goes to my fellow Americans who believe that we have to act on
climate change: Make your voice heard. An effective solution must
include both personal action and government policy. But the former can
be encouraged by the latter, so we must focus on policy intervention,
which includes electing climate-friendly politicians. That’s the single
most important thing we can do right now.

Tuesday, December 4, 2018

Jomo Kwame Sundaram and Anis Chowdhury published a good article reminding us of the original idea of an international trade organisation as discussed and proposed at the end of the Second World War, mainly by developing countries and among them, mainly the Latin American countries since most of the other developing countries were still European colonies.

Reading the article, I realised again how much harm the leaders of the rich countries have done to the poor and (almost) powerless in the Third World, and how much the Third World has changed (or remained the same) -- to become the global market place where the rich of both industrialised and developing countries make their fortunes and limit the chances of the less fortunate.

I also realised again how much harm an international monetary system based on the US dollar has done to the hopes of social democracy. Below is the article by Jomo and Chowdhury as I received it this morning by e-mail.

Havana Charter's Progressive Trade Vision Subverted

Jomo Kwame Sundaram, Anis Chowdhury

KUALA
LUMPUR & SYDNEY, Dec 04 (IPS) - In criticizing the ‘free trade
delusion', UNCTAD's 2018 Trade and Development Report proposes an
alternative to both reactionary nationalism, recently revived by
President Trump, and the corporate cosmopolitanism of neoliberal
multilateral discourse in recent decades by revisiting the Havana
Charter on its 70th anniversary.

From ITO to WTO

Instead,
it urges reconsideration of lessons from the struggle from 1947 for the
Havana Charter. Although often depicted as the forerunner of the
General Agreement on Tariffs and Trade (GATT), the Charter was far more
ambitious.

Initially
agreed to 70 years ago by over 50 countries -- mainly from Latin
America, as much of the rest of the developing world remained under
European colonial rule -- it was rejected by the US Congress, with GATT
emerging as a poor compromise.

As
envisaged at Bretton Woods in 1944, over 50 countries began to create
the International Trade Organization (ITO) from 1945 to 1947. In 1947,
56 countries started negotiating the ITO charter in Havana following the
1947 United Nations Conference on Trade and Employment in Havana,
eventually signed in 1948.

The
idea of a multilateral trade organization to regulate trade -- covering
areas such as tariff reduction, business cartels, commodity agreements,
economic development and foreign direct investment -- was first mooted
in the US Congress in 1916 by Representative Cordell Hull, later
Roosevelt's first Secretary of State in 1933.

However,
the US Congress eventually rejected the Havana Charter, including
establishment of the ITO, in 1948 following pressure from corporate
lobbies unhappy about concessions to ‘underdeveloped' countries. Thus,
the Bretton Woods' and Havana Charter's promise of full employment and
domestic industrialization in the post-war international trade order was
aborted.

In
their place, from 1948 to 1994, the GATT, a provisional compromise,
became the main multilateral framework governing international trade,
especially in manufactures, the basis for trade rules and regulations
for most of the second half of the 20th century.

The
Uruguay Round from 1986 to 1994, begun at Punta del Este, was the last
round of multilateral trade negotiations under GATT. It ended the
postwar trading order governed by GATT, replacing it with the new World
Trade Organization (WTO) from 1995.

Developmental fair trade?

The
UNCTAD report urges revisiting the Havana Charter in light of new
challenges in recent decades such as the digital economy, environmental
stress and financial vulnerabilities. So, what lessons can we draw from
the Havana Charter in trying to reform the multilateral trading order?

In
light of economic transformations over the last seven decades, it is
crucial to consider how the Havana Charter tried to create a more
developmental and equitable trading system, in contrast with actual
changes in the world economy since.

After
all, the Charter recognized that a healthy trading system must be based
on economies seeking to ensure full employment while distributional
issues have to be addressed at both national and international levels.

Profitable,
but damaging business practices -- by large international,
multinational or transnational firms, abusing the international trading
system -- also need to be addressed.

The
Charter recognized the crucial need for industrialization in developing
countries as an essential part of a healthy trading system and
multilateral world order, and sought to ensure that international trade
rules would enable industrial policy.

The
GATT compromise exceptionally allowed some such features in post-war
trade rules, but even these were largely eliminated by the neoliberal
Uruguay Round, as concerns about unemployment, decent work and
deindustrialization were ignored.

Paths not taken

The
evolution of the international trading system has been largely
forgotten. Recent and current tensions in global trade are largely seen
as threatening to the post-Second World War (WW2) international economic
order first negotiated in the late 1940s and revised ever since.

But
the international order of the post-WW2 period ended in the 1970s, as
policymakers in the major developed economies embraced the
counter-revolutionary neoliberal reforms of Thatcherism and Reaganism
against Keynesian and development economics after Nixon unilaterally
destroyed the Bretton Woods monetary arrangements.

Besides
international trade liberalization as an end in itself, financial
liberalization and globalization were facilitated as financial markets
were deregulated, not only within national economies, but also across
international borders.

Industrial
policy, public enterprise and mixed economies were purged by the new
neoliberal fundamentalists as the very idea of public intervention for
healthy, equitable and balanced development was discredited by the
counter-revolution against economic progress for all.

With
multilateralism and the Doha Development Round under assault,
retrieving relevant lessons from the Havana Charter after seven decades
can be crucial in steering the world between the devil of reactionary
nationalist ‘sovereigntism' and the deep blue sea of neoliberal
corporate cosmopolitanism or ‘globalism'.

Thursday, October 4, 2018

Picking up on a phrase in the post before the previous one on Letelier, I copy below an interesting article from the Swiss daily paper Le Temps about the Casino Global Financial System. In addition to what you can read below, I'd like to stress that the casino character of the global financial system has been caused by policymakers when they decided in the early 1970s to not reform the international monetary system and, instead, give full power and freedom to the commercial banks. Well, initially they maintained some controls over the financial sector (banks, investment funds and insurance companies) but when they adopted neoliberal policies in the 1980s they gave the banks the enormous power they still have. The phrase in the before last post I am picking up is: "The events [credit crisis of 2007-08] exposed the extent of finance-led global economic
integration, making countries highly vulnerable to financial contagions,
policy ‘spillovers’ and economic imbalances."

Sunday, July 29, 2018

Anis Chowdhury |
Published: 00:00, Jul 30,2018
| Updated: 00:41, Jul 30,2018
TEN years ago the world awakened about the reality of a financial
crisis, rapidly engulfing the world, and turning into a ‘Great
Recession’. In July–August 2008, a loss of confidence in the value of
sub-prime mortgages in the US caused a liquidity crisis and forced the
US Federal Reserve to inject a large sum of capital into the financial
market. A month later in September 2008, the Lehman Brothers went belly
up.
The events exposed the extent of finance-led global economic
integration, making countries highly vulnerable to financial contagions,
policy ‘spillovers’ and economic imbalances. It also revealed critical
vulnerabilities of the post-World War II US-centric international
financial architecture — the Bretton Woods system — modified after its
breakdown in the early 1970s.
The Bretton Woods system had been under
increasing strains since the late 1960s because of higher US inflation
rates with president Johnson’s decision not to fund the unpopular
Vietnam War through higher taxes, but by issuing debt. The post-WW II
system finally collapsed when the Nixon administration unilaterally
decided to withdraw US commitment to gold convertibility of the US
dollar in August 1971. Since then, the US dollar has become a paper
currency, flooding the world, and what emerged was a ‘non-system’,
according to Robert Triffin, a foremost international monetary
economist.

Flaws in the current ‘non-system’
ROBERT Triffin
pointed out three systemic flaws of the non-system in the wake of the
1980s global debt crisis causing ‘lost decades’ for developing
countries. First, ‘its fantastic inflationary proclivities, leading to
world reserve increases eight times as large over a brief span of
fifteen years’ (1970–1985). Second, ‘skewed investment pattern of world
reserves, making the poorer and less capitalized countries of the third
world the main reserve lenders, and the richer and more capitalized
industrial countries the main reserve borrowers of the system’. Third,
‘crisis-prone propensities reflected in the amplitude of the present
world debt problem’.
Critics have identified further flaws. The
first is the ‘recessionary bias’, arising from the asymmetric burden of
adjustment to payment imbalances. While the deficit countries must
adjust, especially when financing dries out during crises, surplus
countries do not face a similar pressure to correct their imbalances.
The second is the ‘Triffin dilemma’, arising from the use of a national
currency (in this case the US dollar) as a major reserve or global
currency. The provision of international liquidity requires that the
country (the US) supplying the reserve currency run balance-of-payments
deficits. While this may erode the confidence in that currency, it also
ensures spillovers from the US monetary policy on other countries. The
third is the the ‘inequity bias’, generated by the need of emerging and
developing countries to ‘self-insure’ against strong boom–bust cycles of
global finance by building up large foreign exchange reserves, as
demonstrated since the 1997–98 Asian financial crisis.
Such
precautionary measures enabled the emerging economies to undertake
counter-cyclical measures during 2008–2009 Great Recession. But they
have huge ‘social opportunity cost’ as these reserves are generally kept
in low interest perceived safe assets, such as the US treasury bonds,
instead of investing to improve socio-economic conditions. Triffin felt
very strongly, complaining, ‘the richest, most developed, and most
heavily capitalised country in the world should not import, but export,
capital, in order to increase productive investment in poorer, less
developed, and less capitalised countries… [The] international monetary
system is at the root of this absurdity’.

Calls for reforms
THERE have been renewed calls
for reforms of the global economic governance architecture in the wake
of the global financial crisis, especially from the 2009 UN Conference
on the World Financial and Economic Crisis and Its Impact on
Development. This included reform of the governance of the International
Monetary Fund and the World Bank, on the basis of fair and equitable
representations of developing countries to improve the credibility and
accountability of these institutions and to reflect current realities of
emerging economies in the global economy. Developing countries also
called for a ‘multilateral legal framework for sovereign debt
restructuring’ through a UNGA resolution (A/68/L.57/Rev2).
There was
also a promise to keep the international trading system as open as
possible, with the G20 leaders committing to avoid protectionist
measures. There was a renewed hope for trade multilateralism and an
early successful completion of the Doha Development Round of the World
Trade Organisation, giving developing countries better access to
developed country markets. This was seen as vital for balanced global
recovery and development.

Complacency
EVERY financial crisis in the past
was followed by calls for reforms, but complacency setting in with the
green-shoot of recovery. This time, it is not different. Policymakers in
virtually every major country turned focus on domestic issues despite
their rhetoric of international cooperation for reforms and policy
coordination.
Even though the prospects for global financial
governance reform seemed promising following the first G20 summit in
November 2008, the developed world dragged on and the US Congress was
unwilling to approve the agreed limited quota reform of the IMF until
very recently. The promises made in 2008 were repeated at successive G20
summits and in other international forums. Yet, the promised reforms
have only been partially implemented, resulting in limited changes in
global financial governance architecture, still dominated by advanced
countries, in particular the G7, thus undermining its legitimacy.
In
the absence of a legally binding multilateral, fair, sovereign debt
work-out mechanism, developing countries remain targets of private
creditors and vulture funds. While creeping protectionist measures are
strangling global trade, developed countries have effectively killed the
Doha Development Round by insisting to renegotiate settled matters and
opting for bilateral and regional free trade deals, the most prominent
of which is the Trans-Pacific Partnership. These are weak substitutes
for multilateral deals, not least because they are often one-sided
agreements written by the strongest signatory.
Ahead of the 2016
annual spring meetings of the IMF and the World Bank, US Treasury
secretary Jacob Lew said that it was necessary to have reforms to
modernise the international economic architecture set up after World War
II. But the aim, in his opinion, is to preserve and strengthen his
country’s position and secure benefits for the United States. While not
surprising, it ignores the fact that the emerging economies and
developing countries are still under-represented in the global financial
architecture, even after the US Congress finally approved a much
delayed set of limited reforms in 2015 and the IMF has recently agreed
to include the Chinese renminbi in the SDR basket.

Increased vulnerability
MEANWHILE, the global
economy has become more vulnerable on a number of fronts. First, the
unabating rise in income inequality and wealth concentration due to
failure to regulate executive salaries while wage growth remains
stagnant or falling, exacerbated by perverse fiscal measures involving
cuts in top tax rates and welfare programmes — ‘reverse Robin Hood’, and
non-conventional monetary policy disproportionately benefiting the
owners of financial assets. The econd is the unchecked rise in household
debts, partly because of no or little real wage growth. The third is
the increased integration of developing countries through global value
chains, opening to foreign financial institutions and short-term capital
flows (debts) induced by unconventional monetary policies of the US
Fed, ECB and the Bank of Japan. These vulnerabilities are compounded in
the face of devastating protectionist trade wars looming large.

Less capable of handling
ALAS, 10 years after the
worst economic downturn since the ‘Great Depression’ of the 1930s, the
global economy is in a much weaker position to handle even a minor
crisis. Most developed country governments are now more heavily indebted
than they were in 2008–2009 as they bailed out large financial
institutions, but failed to jump-start the economy in a robust way.
Major monetary authorities are over-burdened and do not have much policy
space left after pursuing extra-ordinary expansionary policies for so
long. The emerging economies’ precautionary holdings of reserves have
also dwindled as the global trade slowed almost to a halt while the
concern for debt-sustainability of a number of developing countries is
growing. President Trump’s preference for bilateral agreements
benefiting the US is unlikely to provide the boost to multilateralism so
badly needed now. Consolidating US dominance can only worsen the
situation.

Anis Chowdhury, an adjunct professor at Western Sydney
University and the University of New South Wales (Australia), held
senior United Nations positions in New York and Bangkok.

Friday, July 27, 2018

July 18, 2018
Chinese investors are lining up to take advantage of cheap real
estate in Greece where prices hit bottom during the economic crisis. For
Chinese buying property in Greece is of high interest due to the Golden
Visa program that grants them a 5-year residence permit for them and
their family.

Foreign buyers are lining up to invest in real estate in
Greece, a market that crashed during the country’s economic crisis and
has yet to fully recover. Prices dropped by around 45 percent though
real estate agents say in some areas of Athens the real drop reached
close to 60 percent. Prices hit rock-bottom with some apartments in the
center of Athens selling for as low as 10,000-15,000 euros.

But it’s not only the cheap prices that make Greek real
estate appealing to foreign investors (much cheaper than other European
countries like Portugal, Spain, Italy and Germany).

Greece’s residence-for-investment program, introduced in
2013 and one of the cheapest in Europe, has been luring thousands of
foreign buyers who, when they buy real estate property worth at least
250,000 euros (292,625 US dollars), get a five-year residence permit
that also allows them and their families to freely travel in most of
Europe.

Chinese buyers are the top nationality applying for the
so-called “Golden Visa Program.” According to data from Enterprise
Greece, by the end of 2017 Greece had granted 2,305 “golden visas.”
Chinese investors make up almost half of all investors having been
granted 1,011 visas, followed by those from Russia (395 visas) and
Turkey (222 visas).

Wednesday, February 14, 2018

The rich have benefited from the last international "crisis" and increase their wealth. What about the poor and the middle classes? Here is an article from the French journal La Tribune about the happy 1% (if you cannot read French, google translation is pretty good):

International financial crises have plagued the world
in recent decades, including the Latin American debt
crisis of the 1980s, the East Asian crisis of the late
twentieth century, and the global financial crisis of
2007-09. One of the basic problems faced during these
crises is the lack of adequate preventive mechanisms, as
well as insufficient instruments to finance countries in
crisis and to overcome their over-indebtedness.
Resetting the International Monetary (Non)System
provides an analysis of the global monetary system and
the necessary reforms that it should undergo to play an
active role in the twenty-first century and proposes a
comprehensive yet evolutionary reform of the system.
Criticising the ad hoc framework- a "(non)system"-
that has evolved following the breakdown of the Bretton
Woods arrangement in the early 1970's, Resetting the
International Monetary (Non)System places a special
focus on the asymmetries that emerging and developing
countries face, analysing the controversial management
of crises by the International Monetary Fund and
proposing a consistent set of reform proposals to design
a better system of international monetary cooperation.
Policy orientated and structured to deal in a sequential
way with the issues involved, it suggests provision of
international liquidity through a system that mixes the
multicurrency arrangement with a more active use of the
IMF's Special Drawing Rights; stronger mechanisms of
macroeconomic policy cooperation, including greater
cooperation in exchange rate management and freedom to
manage capital flows; additional automatic
balance-of-payments financing facilities and the
complementary use of swap and regional arrangements; a
multilateral sovereign debt workout mechanism; and major
reforms of the system's governance.

Sunday, January 21, 2018

Protesters
clash with riot police outside the parliament building during a
demonstration against planned government reforms that will restrict
workers right to strike in Athens, Greece, January 15, 2018.
REUTERS/Costas Baltas
Reuters reported recently about protests in Greece against "reforms" demanded by the Troika of the European Commission, the European Central Bank, and the IMF:

"Greece’s parliament on Monday [January 15] passed a swathe of reforms demanded by international lenders in exchange for fresh bailout funds, a success for the government but a blow to thousands of people protesting outside.The bill introduces a new electronic process for foreclosures on overdue loans and arrears to the state, opens up closed professions, restructures family benefits and makes it harder to call a strike.About 20,000 people rallied outside parliament during the vote. Bus, subway and city rail services were disrupted and some flights were grounded as workers went on strike to protest against the bill."

My sister Barbara, who lives in Greece, commented in a letter to me:

"The consequences will be felt in the course of this year for many people in benefits, by auctions of houses, privatizations, restrictions on the right to strike, etc. The slogan of the government is: "just development ", which refers to making Greece attractive to foreign capital, the sale of ports, airports, railways, electricity, water, etc. while the population is kept alive by occasionally giving them some extra money in the form of a one-off benefit, alms, as it is called, but on the other hand to limit wages and benefits. And the brain drain still goes on ...."

Wednesday, January 17, 2018

I read an interesting article about Rotterdam and the Netherlands in the New York Times of which I will copy the first paragraphs below. I read it because of a a conversation I had with the director corporate strategy of the Port of Rotterdam. In preparing the interview I read a couple of articles and power point presentations about Rotterdam and the Paris Climate Agreement. Very interesting stuff!

In the waterlogged Netherlands, climate
change is considered neither a hypothetical nor a drag on the economy.
Instead, it’s an opportunity.

ROTTERDAM, the Netherlands — The wind over the
canal stirred up whitecaps and rattled cafe umbrellas. Rowers strained
toward a finish line and spectators hugged the shore. Henk Ovink,
hawkish, wiry, head shaved, watched from a V.I.P. deck, one eye on the
boats, the other, as usual, on his phone.

Mr. Ovink is the country’s globe-trotting
salesman in chief for Dutch expertise on rising water and climate
change. Like cheese in France or cars in Germany, climate change is a
business in the Netherlands. Month in, month out, delegations from as
far away as Jakarta, Ho Chi Minh City, New York and New Orleans make the
rounds in the port city of Rotterdam. They often end up hiring Dutch
firms, which dominate the global market in high-tech engineering and
water management.

That’s because from the first moment settlers
in this small nation started pumping water to clear land for farms and
houses, water has been the central, existential fact of life in the
Netherlands, a daily matter of survival and national identity. No place
in Europe is under greater threat than this waterlogged country on the
edge of the Continent. Much of the nation sits below sea level and is
gradually sinking. Now climate change brings the prospect of rising
tides and fiercer storms.

From a Dutch mind-set, climate change is not a hypothetical or a drag on
the economy, but an opportunity. While the Trump administration
withdraws from the Paris accord, the Dutch are pioneering a singular way
forward.

It is, in essence, to let water in, where possible,
not hope to subdue Mother Nature: to live with the water, rather than
struggle to defeat it. The Dutch devise lakes, garages, parks and plazas
that are a boon to daily life but also double as enormous reservoirs
for when the seas and rivers spill over. You may wish to pretend that
rising seas are a hoax perpetrated by scientists and a gullible news
media. Or you can build barriers galore. But in the end, neither will
provide adequate defense, the Dutch say.

And what holds true for managing climate change
applies to the social fabric, too. Environmental and social resilience
should go hand in hand, officials here believe, improving neighborhoods,
spreading equity and taming water during catastrophes. Climate
adaptation, if addressed head-on and properly, ought to yield a
stronger, richer state.

This is the message the Dutch have been taking
out into the world. Dutch consultants advising the Bangladeshi
authorities about emergency shelters and evacuation routes recently
helped reduce the numbers of deaths suffered in recent floods to
“hundreds instead of thousands,” according to Mr. Ovink.

“That’s what we’re trying to do,” he said. “You
can say we are marketing our expertise, but thousands of people die
every year because of rising water, and the world is failing
collectively to deal with the crisis, losing money and lives.” He ticks
off the latest findings: 2016 was the warmest year on record; global sea
levels rose to new highs.

Rowing teams practice at the Eendragtspolder, a site intended to be both a public amenity and a reservoir for floodwater.

He proudly shows off the new rowing course just
outside Rotterdam, where the World Rowing Championships were staged
last summer. The course forms part of an area called the
Eendragtspolder, a 22-acre patchwork of reclaimed fields and canals — a
prime example of a site built as a public amenity that collects
floodwater in emergencies. It is near the lowest point in the
Netherlands, about 20 feet below sea level. With its bike paths and
water sports, the Eendragtspolder has become a popular retreat. Now it
also serves as a reservoir for the Rotte River Basin when the nearby
Rhine overflows, which, because of climate change, it’s expected to do
every decade.

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The project is among dozens in a nationwide
program, years in the making, called Room for the River, which
overturned centuries-old strategies of seizing territory from rivers and
canals to build dams and dikes. The Netherlands effectively occupies
the gutter of Europe, a lowlands bounded on one end by the North Sea,
into which immense rivers like the Rhine and the Meuse flow from
Germany, Belgium and France. Dutch thinking changed after floods forced
hundreds of thousands to evacuate during the 1990s. The floods “were a
wake-up call to give back to the rivers some of the room we had taken,”
as Harold van Waveren, a senior government adviser, recently explained.

“We can’t just keep building higher levees,
because we will end up living behind 10-meter walls,” he said. “We need
to give the rivers more places to flow. Protection against climate
change is only as strong as the weakest link in the chain, and the chain
in our case includes not just the big gates and dams at the sea but a
whole philosophy of spatial planning, crisis management, children’s
education, online apps and public spaces.” TO READ FURTHER, click HERE

Monday, January 8, 2018

When those responsible for global financial policies say they want to avoid another global financial crisis, I do not believe them because a crisis suits both private capitalists and state capitalists (eg the Chinese). It gives them the opportunity to get "assets" such as ports (eg Piraeus) and other utilities at a low price, creates the legitimacy to reduce labour costs, dismiss workers and make their employment contracts more flexible and, more generally, allows them to prescribe and apply austerity policies.

Another reason why politicians were not really dissatisfied with earlier global financial crises that have occurred since the sixties of the twentieth century is that they created the opportunity to maintain the military supremacy of the United States. In each international crisis of the dollar the countries have taken the deliberate political decision to continue supporting the global financial system based on the dollar, thus financing the military costs of the US, or have been forced to support it since there was no alternative.

Do the euro and renmimbi threaten the survival of the global financial system based on the dollar? No. The European Union continues to support the dollar-based system, as it continues to support NATO, and China may say that it favours a larger role for SDR, but that is not a threat to the current system, nor is the incorporation of renmimbi in the SDR basket a threat.

Will the current global financial system based on the dollar be with us forever? Here we have the famous saying, I think (but I'm not sure), of a well-known Dutch central banker, Jelle Zijlstra: 'When we had a crisis of the pound sterling as the key currency of the IMS, we were able to move towards the adoption of the dollar. But, where can we go when there is a crisis of the US dollar? To the moon?'

However, I still believe in the possibility of transforming the current global financial system into a better system, eg by adopting an updated version of Keynes' proposal of an international clearing agency (see Jane D'Arista's upcoming book "All Fall Down: Debt, Deregulation and Financial Crises", and Jan Kregel's A Blueprint for Reform of the International Monetary System (2)).

Why do I believe that? Because at a certain moment it will be in the interest of those responsible for global financial policies to reform the system.

So far the poor have suffered from global or regional financial crises, while the rich have benefited from them. But that does not mean it will always be like that. Climate change is now seen by the rich as a threat.

When will global financial crisis be seen by global financial policymakers (businesses, central banks and ministries of finance) as a threat rather than an opportunity?

Saturday, January 6, 2018

For ten years, Percy Mistry was the man with whom I worked most
closely within FONDAD. A friend of mine who worked at the World Bank
said to me at the end of the eighties: maybe he will soon leave the
World Bank and if I were you I would immediately contact him. A
large number of books that I have published as director and
editor-in-chief of FONDAD have been written by Percy (see Fondad publications by Percy Mistry).

But here I
want to talk about his 'sister' or the lady he introduced to me as
his sister when we saw each other again after 20 years, but who is
actually his cousin: her mother is his father's sister, but the two
families have lived in the same family building in Bombay and they
grew up like sister and brother. Percy lives in Bombay for the winter part of
the year, his permanent home is in Oxfordshire in the UK.

Percy and I saw each other back at CCI, or the Cricket Club of
India. Just like at the Willingdon Sports Club we sat at a table on
the lawn, a kind of outdoor terrace, and because there was a lot of
noise and I was sitting next to Percy's sister, I had a conversation
with her, while Aafke on the other side of the table had a
conversation with Percy and his protégé who worked at the OECD. Percy has a
serious illness and after half past eight in the evening is only
capable of falling asleep or watching TV.

His sister told me about her mother who gambled money at horse
racing, but she also told me about another cousin of hers who is
committed to
teaching children from slums. That cousin has already made thousands
of slum (and disabled) children happy with education that was
not only focused on learning but also on drawing and sports. And so
for me, and later also for Aafke, the first-class lady became a
lively, sweet woman with whom Aafke had a conversation about her
youth at Catholic boarding schools in India and in Switzerland.

About Me

As a kid I liked numbers and the sound of strings. I considered studying engineering but chose social sciences because of my interest in people. I combine a theoretical interest with a practical, social approach which brought me to the sphere of policy research. I am interested in reducing the disparity between poor and rich, between the powerful and the less powerful.
In 1973 and 1982 I lived in Latin America. In the mid-1980s, I was able to create an international forum to discuss the functioning of the international monetary system and the debt crisis, the Forum on Debt and Development (FONDAD). I established it with the view that the debt crisis of the 1980s was a symptom of a malfunctioning, flawed global monetary and financial system.
I was one of the driving forces behind the creation of the European Network on Debt and Development that was established at the end of the 1980s to help put pressure on European policymakers.
In 1990, before the beginning of the Gulf War, I cofounded the Golfgroep, a discussion group about international politics comprising journalists, scientists, politicians and activists that meets regularly.
The website of FONDAD is www.fondad.org